EU Enlargement Could Lead to Major Budget Adjustments for Member States

Impact of EU Enlargement on Cohesion Funds
A recent study by the Bruegel Institute has analyzed the potential consequences of an expansion of the European Union to include nine new member states. The study estimates that current EU members could face an additional annual net cost of approximately €26 billion. This cost is primarily linked to the redistribution of EU cohesion funds, which are designed to assist less-developed regions in the EU by promoting regional development and reducing disparities. Cohesion funds are allocated to countries and regions that have a GDP per capita below 75% of the EU average.

However, with the enlargement, most of the current “less-developed regions” in Southern Europe—such as parts of Spain, Italy, Portugal, Greece—would be reclassified as “transition regions.” As a result, they would receive less funding, as the new member states would bring in additional areas with lower GDPs. The biggest losses are expected in Italy and Spain, each losing nearly €9 billion. Portugal, Hungary, and Romania will also face significant cuts, estimated at €2 billion to €4 billion each.

Poland’s Cohesion Funding Unaffected
Interestingly, Poland’s position is somewhat unique in this scenario. Despite regional shifts, Poland will not face reductions in cohesion funds due to a cap imposed on its funding allocation. The EU had previously set Poland’s cohesion fund allocation to a ceiling of 2.3% of its GDP, which means the new classifications and changes in the region’s economic status will not affect Poland’s share of the funds.

Rising EU Budget with Enlargement
If the EU expands to include the nine candidate countries, the overall EU budget is expected to grow from €1.211 trillion to €1.356 trillion. While the increase in the budget will help absorb the costs associated with new member states, the reallocation of funds within this budget will inevitably put pressure on countries that currently benefit from the largest shares of cohesion funds.

Bruegel’s analysis also looked at other areas of the EU budget, including the Common Agricultural Policy (CAP) and public administration, which could see adjustments to accommodate the new members. The EU is expected to revise its financial framework and implement a transition period before new members can access full funding benefits, potentially mitigating the immediate financial strain.

Economic Benefits for Existing EU Countries
While the net cost of expansion could be substantial, Bruegel argues that the enlargement will bring economic advantages for existing EU members. A larger EU could enhance economic growth through increased exports and foreign direct investment (FDI), particularly as Western EU countries continue to invest in Central and Eastern European economies, as they have done since previous enlargements.

The addition of new member states could also alleviate labor shortages in some EU countries, offering a source of workers from regions with lower unemployment rates. This could provide a long-term economic boost to the EU as a whole, even as some member states face reductions in their share of EU funds.